Wednesday, 28 December 2016

British soaring salaries

Great economic news. At last.

It seems that salaries are soaring in Britain.

Well, OK, not everyone’s salaries. In fact, I might have to go so far as to admit it’s not even most salaries. To be perfectly honest, it’s only the salaries of the top managers of British businesses that have been soaring.

Still, at least it’s good news that someone’s doing well in harsh times. Isn’t it? And it’s spectacularly well, apparently: an 82% increase in eleven years.

Our best and brightest
Or best paid, at least
Sadly, a new report suggests that these senior executives don’t deserve their remuneration. That the performance of their companies doesn’t justify it. Hard to believe, isn’t it? I mean, what sort of company would pay its executives a salary they haven’t earned? After all, top salaries are mostly set by people who know what they’re doing: top executives from other firms. Whose salaries are set by those whose salaries they set.

How could a system that carefully attuned and balanced go wrong?

I don’t move in such rarefied circles. Over a long and colourful career, I’ve had the privilege, or at least the experience, of working for several fine companies in which I’ve reported to execs a couple of rungs down from those outstanding individuals on their seven-figure salaries. These are the men (all have been men) paid in the low to mid six-figure range (in pounds) – so between 5 and 20 times median earnings, as opposed to 40 times and more.

It has been edifying to see how remarkably they perform. I have, for instance, observed the following admirable leadership techniques.

The Excel Predictor This is a method for forecasting changes in earnings. “Changes” in this context, a prediction, always means growth, unlike a review (swiftly followed by a justification and often redundancies) can mean decline.

The method requires locking an executive or three in a room somewhere with a desktop computer and an Excel spreadsheet. This allows them to calculate just what new sales need to be generated to reach the level of growth they wish to achieve.

I was once asked, seriously, whether it wasn’t reasonable to forecast ten sales of a product with four salesmen.

“That’s less than three each in the year. One every half year and a couple extra. That’s hardly a demanding target, is it?”

“How many sales did we have last year?”


“So you’re looking for a 500% increase?”

But that was nit-picking objection. Two and a half sales each was hardly a massive mountain to climb for experienced salesmen, was it?

We forecast ten sales.

And took one.

The Important Meeting Sometimes executives extend their discussions beyond the claustrophobic circle of three or four gathered around a computer. Indeed, there are some for whom the more important the question, the bigger the meeting. And the longer it lasts.

I’ve sat in meetings of 15 people that lasted the entire day – eight hours. Something in the region of £7000 in costs. The question was how to meet the company’s demand for 30% growth in our division.

We debated how we could win more sales of our existing products. We then discussed what new products we could dream up. We discussed what it would take to build them and sell them. We then discussed all those things over again, three or four more times.

To at least twelve of the people present, it was perfectly clear that the target was unachievable. But the other three were the executives who had foregathered around a computer. They eventually put in a plan based on achieving the desired level of growth.

In the event, the division saw revenue shrink instead of growing. But that wasn’t a problem. Several junior staff were made redundant.

The Gifted Individual There’s no ‘I’ in ‘team’, I’m told. But there’s a big ‘I’ several times over in the ‘Inspired Individual endowed with unique Insight’.

Have you ever had the privilege of working with one of those? No? You don’t know what you’re missing. Just hope that your career will give you the opportunity yet.

These characters are mostly self-taught, but what they’ve learned by applying their Intuition (another ‘I’, you see) to a couple of textbooks they’ve glanced through, enables them to outperform any mere professional with years of experience on top of solid training.

This means that if they win no sales for a couple of years, and the product they champion is bug-ridden and incapable of performing to specification (a fact not entirely unrelated to the sales success), it is entirely due to the ineptitude or downright indolence of their more junior colleagues.

The answer to the problem? A few redundancies among those low performers.

I’m sure the people who stand even further up the hierarchy than these fine executives, are at least as outstanding in their work. It’s therefore beyond me to understand how anyone can think they fail to earn their colossal salaries. These are the men on the pinnacles of our economy – who are we to doubt them?

On the contrary, shouldn’t we be enthusiastically supporting the moves of our present enlightened British government to hand more of the management of our public services over to them?

Perhaps we could pay them a little more for taking on that responsibility.


Awoogamuffin said...

It feels like there's a magical line which, once passed, means your wealth will continue to balloon despite yourself. Your examples remind me of that one most unjust of the many mechanisms that make this possible; executives find themselves in the enviable position of getting all the credit (and associated raises and bonuses) for any success, whereas junior employees feel the sharp end of failure. A bit like banks raking in billions on dodgy loans, then taxpayers bailing them out when everything goes to hell.

David Beeson said...

You shock me. It's almost as though you too doubted that top executives really deserved the astronomical salaries they pay themselves.